🚢 Export of Goods & Services
Key regulations for exports, realization time limits, payment methods, deemed exports, and export finance facilities.
Overview
Export trade in India is regulated by the DGFT (Directorate General of Foreign Trade), under the Ministry of Commerce & Industry. Authorized Dealer (AD) Banks conduct transactions based on the current Foreign Trade Policy (FTP) and RBI directions.
Currency of Export
- Export contracts can be denominated in Foreign Currency (FC) or Indian Rupee (INR).
- Realization: Must be in freely convertible Foreign Currency or from a freely convertible VOSTRO account of a foreign bank.
Realization of Export Proceeds
Exporters must realize and repatriate the full value of goods/software/services within specific timelines prescribed by RBI.
| Export Type | Time Limit for Realization |
|---|---|
| Goods exported to Warehouse | 15 Months from the date of shipment. |
| Other Exports | 9 Months from the date of shipment. |
RBI allowed for other exports to 15 months during COVID-19 until 31.03.2020.
Receipt and Payment Methods
Export payments must be received in a manner allowed by RBI:
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Overview
Export trade in India is regulated by the DGFT (Directorate General of Foreign Trade), under the Ministry of Commerce & Industry. Authorized Dealer (AD) Banks conduct transactions based on the current Foreign Trade Policy (FTP) and RBI directions.
Currency of Export
- Export contracts can be denominated in Foreign Currency (FC) or Indian Rupee (INR).
- Realization: Must be in freely convertible Foreign Currency or from a freely convertible VOSTRO account of a foreign bank.
Realization of Export Proceeds
Exporters must realize and repatriate the full value of goods/software/services within specific timelines prescribed by RBI.
| Export Type | Time Limit for Realization |
|---|---|
| Goods exported to Warehouse | 15 Months from the date of shipment. |
| Other Exports | 9 Months from the date of shipment. |
RBI allowed for other exports to 15 months during COVID-19 until 31.03.2020.
Receipt and Payment Methods
Export payments must be received in a manner allowed by RBI:
-
OPGSP (Online Payment Gateway Service Providers):
- Allowed for export payments up to USD 10,000.
- AD banks open a NOSTRO collection account for the OPGSP.
- Reconciliation follows a Quarterly cycle.
-
ACU (Asian Clearing Union):
- For exports to ACU member countries (Bangladesh, Bhutan, Iran, Maldives, Nepal, Pakistan, Sri Lanka).
- Payment is settled through Asian Monetary Units (AMU).
- Exception: Payments to/from Myanmar are settled in hard currency, not through ACU mechanism.
-
Counter Trade Arrangement:
- Adjustment of imports/exports through an Escrow Account.
- Allowed by RBI subject to specific terms and conditions.
Export Finance for Deemed Exports
What are Deemed Exports?
"Deemed Export" refers to the supply of goods within India (not crossing borders) which are considered equal to physical exports under special schemes. They are eligible for specific export benefits.
- Example: Supplies to projects funded by agencies notified by the Govt. of India (e.g., World Bank funded projects in India) under the Deemed Export category in Foreign Trade Policy.
Finance Availability
Banks provide both Pre-shipment and Post-shipment finance for deemed exports.
- Pre-shipment Credit: Period is at the bank's discretion.
- Post-shipment Credit: Maximum period is 30 days.
Export Finance: Duty Drawback
Duty Drawback is the refund of duties (Excise, Customs, GST, etc.) paid on inputs used to manufacture export products. Banks can finance these claims.
- Nature of Advance: Given as an Overdraft (OD) or Demand Loan (DL). It is a form of Post-shipment finance.
- Security: The Duty Drawback claims themselves, which must be provisionally certified by the Customs Department.
- Insurance: Should be covered by ECGC (Export Credit Guarantee Corporation).
- Period: From the date of certification by Customs until the date of receipt of money.
- ROL: Bank discretion.
Miscellaneous Provisions
Extension of Time (Post-Shipment)
If an exporter cannot realize proceeds within the prescribed time, AD banks can grant extensions.
- Authority: Banks can allow extensions up to 6 months at a time.
- Long-term Extension (Beyond 12 Months): Total outstanding amount for extension beyond 12 months should not exceed 10% of the average export realization of the preceding 3 years OR USD 1 Million (whichever is higher).
Write-off of Unrealized Bills
If an exporter fails to realize proceeds within one year, they can approach the AD bank to write off the dues.
- Limit: Banks can allow write-off up to 10% of the total export realization of the previous calendar year.
- Condition: The exporter must be a regular customer with a good track record (KYC compliant).
Imports into India
Similar to exports, AD banks conduct import transactions strictly as per the current Foreign Trade Policy (FTP) and RBI directions.
Interest Payment
- Delay: AD banks can pay interest for delay up to 3 years.
- Pre-payment: For pre-payment of usance import, proportionate interest shall be paid.
Receipt of Documents
- Standard: Documents should be received from bankers of overseas sellers.
- Direct Receipt:
- If documents (max value USD 300,000) have been received directly by importers from overseas seller, payment can be made.
- Exception: In case of companies, status holders etc. no such restriction on payment.
- Credit Report: If documents (up to USD 300,000) are directly received by bank from overseas seller, banks to obtain credit report from banks or credit rating agency, before payment.
OPGSP Payment
- Payment on Online Payment Gateway Service Provider can be up to USD 2,000.
Evidence of Import
- For all physical imports, Bill of Entry (BOE) or custom assessment certificate or postal appraisal form or evidence of entry in IDPMS, to be submitted.
- Value < USD 100,000: In lieu of BOE, certificate by CEO of the company can be accepted, if company is listed company with a min Net Worth of Rs. 100 cr.
IDPMS Procedure
- ORM: AD bank to create Outward Remittance Message (ORM) on behalf of importer where evidence of import is not received.
- Settlement: Settlement of ORM with BOE: AD will download BOE issued by EDI port and match the same in IDPMS.
- Extension: If BOE is not uploaded, AD can extend the period and make suitable mention in IDPMS.
- Write-off: If amount variation is up to 5%, AD can consider closure by write off, subject to compliance of some conditions.
Jewellery Imports
- Credit: Supplier’s / buyer’s credit or import LC can be allowed max 90 days from date of shipment.
- Clean Credit: Given by overseas supplier with LC/BG, can be availed max for 180 days from date of shipment.
Merchant Trade
- Definition: Merchant trade means no transformation of goods and goods not entering the Domestic Tariff area.
- Time Limit: Max period for completion: 9 months. Forex outlay max 4 months.
- Finance: Supplier’s / buyer’s credit can be availed.
- Advance Payment: For import up to USD 500,000 is allowed without LC/BG.
- LC: Can be opened in favour of suppliers.
- Payment: Payment for import leg can be allowed from EEFC account.
- Reporting: Default if any, to be intimated to RBI HY (JD) within 15 days.
- Caution-listing: For defaulting traders, caution-listing, if outstanding > 5% of annual export earning.
Remittances & General Provisions
- Compliance: Remittances allowed after ensuring regulatory compliance.
- Negative List: Remittances allowed for all imports except those on the 'negative list'.
- Import Licence: 'Exchange Control Copy' needed to open LC.
- IDPMS: All outstanding import remittances must be uploaded to IDPMS.
- Cards: Import payments can be made using international card, credit card, debit card.
Extension in Settlement
- Authority: AD-1 can allow extension due to disputes etc. by 6 months at a time (max 3 years).
- Beyond 1 Year: Limit is Max USD 1 million or 10% of average import remittance during last 2 FYs (whichever is lower).
- Receipt: A person abroad can send any amount of forex other than coins, notes, TC.
Payment to 3rd Party
- Allowed: ADs can make payment to 3rd parties for imports subject to conditions.
Bank Guarantees (BG) for Imports
- Purpose: ADs can issue BG for debt, obligations, liabilities on behalf of resident in favour of overseas suppliers.
- Service Imports: Max USD 500,000.
- PSE: Max USD 100,000 (unless Ministry of Finance approval).
- Operating Lease: ADs can allow importer to give Corporate guarantee.
Advance Remittances
- For Goods:
- > USD 200,000: Against BG/LC only.
- Bonafide Importers: Up to USD 5 million allowed without BG/LC if unable to get one.
- PSE: > USD 100,000 requires waiver from Ministry of Finance (MoF).
- Rough Diamonds: Allowed if overseas mining company has GJEPC recommendations and not conflict diamonds (Kimberly Certification).
- Aviation: Up to USD 50 million for each aircraft/helicopter/aviation purchase.
- IDPMS: ADs to create Outward Remittance Message (ORM).
- For Services:
- Limit: Advance against import of services allowed up to USD 500,000.
Import Related Trade Credits
1. Trade Credits
- Definition: Credit extended by overseas supplier, bank or Financial Institution (FI) for imports into India.
- Routes:
- Automatic Route
- Approval Route
- Currency: Can be in Foreign Currency (FC) or INR.
- Automatic Route Limit: Max USD 50 million per import transaction.
- Exception: USD 150 million for oil/gas, airline, shipping industries.
- Maturity:
- Non-capital goods: 1 year from date of shipment.
- Capital goods: Up to 3 years.
2. Suppliers' Credit
- Definition: Credit arranged by supplier from overseas banks, supplier, or FI for imports into India.
3. Buyers' Credit
- Definition: Loan arranged by buyer from overseas bank or FI for import into India.
Reporting
- Monthly Report to RBI: For approval, drawl, utilization, repayment, in form TC, by 10th of next month.
- Quarterly Report to RBI: Data on bank guarantees within 10 days.
Forex Management (Borrowing & Lending) Regulations 2018
As per regulation dated 17.12.18:
-
A person resident in India can:
- (i) borrow or lend in forex from or to a person resident in or outside India.
- (ii) borrow in rupees from, or lend in rupees to, a person resident outside India as per RBI directions only.
-
Individual Resident Loans:
- An individual resident in India may borrow up to USD 250,000 or its equivalent, from relatives outside India.
- An individual resident in India studying abroad may raise loan abroad up to USD 250,000 or its equivalent for payment of education fees abroad and maintenance.
-
Overdraft in Rupee Account:
- Maintained with AD in India by a bank outside India.
- An AD may permit a temporary OD, up to Rs. 5 billion, in rupee accounts maintained with it by its overseas branch or correspondent or Head Office outside India.
External Commercial Borrowing (ECB)
Definition & Basics
- ECB: Borrowing by eligible Indian entities from non-resident entities.
- Forms: Loans, Securitized instruments (bonds, debentures, preference shares, FC convertible bonds, FC Exchangeable Bonds), Trade credit above 3 years, and financial lease.
- Currency: Any convertible currency or INR.
- Change of Currency: From one freely convertible currency to another (including to INR) is allowed. INR to FC is NOT allowed.
Routes
- Automatic Route: Through ADs.
- Approval Route: RBI through ADs.
Eligible Entities
- Entities eligible to get FDI.
- Port Trust, SEZ units, SIDBI, EXIM Bank, MFI.
- Recognized Lenders: Residents of FATF compliant countries.
Minimum Average Maturity (MAM) Period
- FC & INR Denominated: 3 years.
- Exceptions:
- ECB from foreign equity holders: 5 years.
- ECB for WC and general purpose & on-lending to NBFCs: 10 years.
- ECB for INR loan repayment for capital expenditure: 7 years.
- ECB for INR loan repayment other than capex: 10 years.
- WC-ECB by manufacturing sector up to USD 50 m/FY: 1 year.
ECB Amount Limit
- Start-up: USD 3 million.
- Others: USD 750 million.
- PS-OMC: USD 10 Billion.
- ECB Liability : Equity Ratio: For direct equity holders: 7:1.
Costs & Hedging
- All-in-Cost Ceiling: Benchmark + 4.5% p.a.
- Hedging Cover:
- 70% exposure for average maturity < 5 years (on or after 26.11.18).
- Min period for financial hedge: 1 year (to be rolled over).
- Restrictions: Issue of BG/SLC/LOU/LOC by Indian banks is not allowed to cover ECB collaterally.
Parking of ECB Proceeds
- Foreign Currency Expenditure: Can be parked abroad in AA rated CD/TB/Deposits with overseas branches of Indian banks, till required (Max 1 year maturity).
- INR Expenditure: Must be repatriated to India immediately.
Conversion & Reporting
- Conversion: ECB can be converted to equity, subject to conditions.
- Reporting to RBI:
- Change in conditions: Within 7 days.
- Transactions in ECB: Monthly basis within 7 days.
Special Instruments
🟦 FCCB (Foreign Currency Convertible Bonds):
- Min maturity: 5 Years.
- Call/Put option: After 5 Years.
- Issue without any warrant.
- Issue expenses: Max 4% (2% for private placement).
🟦 FCEB (Foreign Currency Exchangeable Bonds):
- Can be issued under Approval Route.
- Min maturity: 5 Years.
Summary Cheat Sheet
| Concept / Topic | Key Details / Explanation |
|---|---|
| Export Regulation | Regulated by DGFT (Directorate General of Foreign Trade) under Ministry of Commerce & Industry |
| Transaction Basis | AD Banks conduct transactions per Foreign Trade Policy (FTP) and RBI directions |
| Export Currency | Contracts in Foreign Currency (FC) or INR; realization in freely convertible FC or from VOSTRO account |
| Realization — Warehouse Exports | 15 months from date of shipment |
| Realization — Other Exports | 9 months from date of shipment |
| OPGSP (Export) | Allowed for payments up to USD 10,000; AD opens NOSTRO collection account; quarterly reconciliation |
| ACU Member Countries | Bangladesh, Bhutan, Iran, Maldives, Nepal, Pakistan, Sri Lanka; settled in AMU; Myanmar settled in hard currency (exception) |
| Counter Trade | Adjustment through Escrow Account; allowed by RBI subject to conditions |
| Deemed Exports | Supply of goods within India (no border crossing) treated as exports under special schemes |
| Deemed Export — Pre-shipment Credit | Period at bank's discretion |
| Deemed Export — Post-shipment Credit | Maximum 30 days |
| Duty Drawback | Refund of duties on inputs; given as OD or Demand Loan (post-shipment finance); secured by claims provisionally certified by Customs; insured by ECGC |
| Extension of Time (Post-Shipment) | AD banks can extend up to 6 months at a time |
| Extension Beyond 12 Months | Outstanding not to exceed 10% of avg export realization of preceding 3 years OR USD 1 million (whichever higher) |
| Write-off of Unrealized Bills | After 1 year; up to 10% of total export realization of previous calendar year |
| Import — Interest for Delay | AD banks can pay up to 3 years |
| Import — Direct Document Receipt | Max USD 300,000; no restriction for companies/status holders |
| Import — OPGSP | Up to USD 2,000 |
| Evidence of Import | Bill of Entry (BOE) or customs certificate or IDPMS entry |
| BOE Exemption | For value less than USD 100,000: CEO certificate accepted if listed company with NW Rs. 100 crore+ |
| IDPMS Write-off | Amount variation up to 5% — AD can consider closure |
| Jewellery Import Credit | Supplier's/buyer's credit or LC: max 90 days; clean credit with LC/BG: max 180 days |
| Merchant Trade | No transformation of goods; goods don't enter Domestic Tariff Area; completion max 9 months; forex outlay max 4 months |
| Merchant Trade — Advance Payment | Up to USD 500,000 without LC/BG |
| Merchant Trade — Caution-listing | If outstanding >5% of annual export earnings |
| Import Extension | AD-1 can extend 6 months at a time (max 3 years); beyond 1 year: max USD 1 million or 10% of avg import remittance in last 2 FYs (whichever lower) |
| BG for Service Imports | Max USD 500,000 |
| BG for PSE | Max USD 100,000 (unless MoF approval) |
| Advance Remittance — Goods >USD 200,000 | Against BG/LC only; bonafide importers up to USD 5 million without BG/LC |
| Advance Remittance — Services | Up to USD 500,000 |
| Trade Credits — Automatic Route | Max USD 50 million per transaction; exception USD 150 million for oil/gas/airline/shipping |
| Trade Credit Maturity | Non-capital goods: 1 year; Capital goods: 3 years |
| Suppliers' vs Buyers' Credit | Suppliers' credit arranged by supplier; Buyers' credit arranged by buyer |
| Individual Resident Borrowing | Up to USD 250,000 from relatives outside India |
| Student Abroad Loan | Up to USD 250,000 for education fees and maintenance |
| Temporary OD in Rupee Account | AD may permit up to Rs. 5 billion for overseas branch/correspondent |
| ECB Definition | Borrowing by eligible Indian entities from non-resident entities |
| ECB Forms | Loans, bonds, debentures, preference shares, FCCB, FCEB, trade credit >3 years, financial lease |
| ECB Currency Change | FC to FC or FC to INR allowed; INR to FC NOT allowed |
| ECB MAM — Standard | 3 years (FC & INR denominated) |
| ECB MAM — Foreign Equity Holder | 5 years |
| ECB MAM — WC/General Purpose | 10 years |
| ECB MAM — Manufacturing WC | 1 year (up to USD 50 m/FY) |
| ECB Amount Limit | Start-up: USD 3 million; Others: USD 750 million; PS-OMC: USD 10 billion |
| ECB Liability:Equity Ratio | 7:1 for direct equity holders |
| ECB All-in-Cost Ceiling | Benchmark + 4.5% p.a. |
| ECB Hedging | 70% exposure hedged for avg maturity less than 5 years; min hedge period 1 year |
| ECB Parking Abroad | In AA rated CD/TB/Deposits (max 1 year maturity); INR expenditure repatriated immediately |
| FCCB | Min maturity: 5 years; call/put option after 5 years; issue expenses max 4% (2% for private placement) |
| FCEB | Issued under Approval Route; min maturity: 5 years |
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